Pwc Fin46Guide Final

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National Professional Services Group

Guide to Accounting for Variable Interest Entities
FIN 46R and other related issues
2007

This publication has been prepared for general information on matters of interest only, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this material was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees and agents shall not be responsible for any loss sustained by any person or entity who relies on this publication. The content of this publication is based on information available as of June 30, 2007. Accordingly, certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance that is issued.

Portions of various FASB pronouncements and other FASB materials included in this work, copyright by Financial Accounting Standards Board, 401 Merritt 7, Norwalk, CT 06856, are reproduced by permission. All rights reserved. No part of these FASB documents may be further reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the FASB. Portions of various AICPA pronouncements and materials included in this work, specifically including excerpts from AICPA Audit and Accounting Guides and Accounting Research Bulletins (ARBs) are copyrighted by the American Institute of Certified Public Accountants (AICPA) and are reproduced with permission. All rights reserved. No part of any AICPA documents excerpted herein may be further reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the AICPA. Requests for permission to reproduce AICPA content may be submitted to copyright@AICPA.org.

Dear Clients and Friends: PricewaterhouseCoopers is pleased to offer this publication, which continues the exploration of FIN 46R that we began a few years ago and provides updated guidance on the complex and evolving area of consolidation accounting under U.S. GAAP. When it was issued three years ago, FIN 46R ushered in a new way of thinking about consolidations. Under FIN 46R, whether certain entities, known as “variable interest entities,” should be consolidated is based on the sharing of economic risks and rewards rather than equity ownership and voting rights, which was a significant change from past practice. From the start, FIN 46R’s numerous provisions and new terminology posed challenges for preparers, users and auditors, which prompted us to issue this publication. In it we bring together all of the relevant guidance in this area, provide decision trees to help you navigate the guidance, and offer our perspectives throughout based on our analysis of the guidance and experience applying it. Since FIN 46R was issued, the FASB has issued several staff positions to clarify it and the SEC Staff has made public statements regarding application issues that have arisen. As a result, we believe it is appropriate to refresh our original publication to incorporate these new interpretations. While this publication is intended to clarify the requirements of FIN 46R and to highlight key points that should be considered before transactions are undertaken, it...
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